What is an enterprise agreement?

What is an enterprise agreement?

If you are an Australian business owner with employees, you should be aware of relevant industry Awards that apply to your staff that set out minimum wages, leave and other entitlements. Entering into an enterprise agreement with your employees may allow you vary some terms of the modern award, through bargaining with the employee, so that the terms and conditions of the employment relationship leaves both parties better off in comparison to the entitlements prescribed under the relevant industry Award as would normally be adhered to under a standard employment agreement.

Putting an enterprise agreement in place does not permit employers to evade minimum entitlements and often results in paying higher wages. In any case, the enterprise agreement should result in the employee’s entitlements under the enterprise agreement being better off overall than if they were simply covered by the relevant Award. 

Why have an enterprise agreement over a standard employment agreement?

Depending on the industry, some employers often find implementing an enterprise agreement to be a simpler process and more suitable for longer term considerations. Assessing the impact of an industry Award against the varying employment history and requirements of each employee can be seen as confusing and time consuming when calculating meal allowances, penalty rates and applicable overtime and loading rates. An enterprise agreement could facilitate uniform entitlements for employees (respective to their employment status and role) allowing a more streamlined approach to the calculation of employee entitlements.

Different types of enterprise agreements

There are a number of different enterprise agreements as follows.

  1. Single-enterprise agreements
    • Made between a single employer (or two or more single interest employers) and employees employed at the time the agreement is made.
  2. Multi-enterprise agreement
    • Made between two or more employers (that are not all single interest employers) and employees employed at the time the agreement is made.
  3. Greenfields agreement
    • Made in relation to a new enterprise of the employer or employees before any employees are employed. This can either be a single-enterprise or multi-enterprise agreement.

What terms should and should not be included in an enterprise agreement?

There are a number of terms are compulsory to be present within an enterprise agreement as follows (including but not limited to):

  • Genuinely agreed by the relevant employees.
  • Passes the Better Off Overall Test.
  • Does not include unlawful terms inconsistent with the National Employment Standards.
  • Agreement specifies a nominal expiry date not more than four years after the date of approval.
  • Provides dispute resolution, flexibility and consultation clauses.

Among a number of considerations set out by the Fair Work Commission. Enterprise agreements will not be approved if they include the following terms (including but not limited to):

  • Discriminatory provisions.
  • Removal of an employee’s right to claim unfair dismissal.
  • Provisions contradictory to the general protections provisions of the Fair Work Act 2009 (Cth).

Seeking legal advice is crucial

The process of approval from beginning to end of developing and implementing an enterprise agreement is a lengthy and multi layered process with many thresholds and requirements set out for employers in order to receive approval from the Fair Work Commission.

If you are considering implementing an enterprise agreement for your business, it is crucial that you seek legal advice before embarking on this procedure. 

Click here to book a FREE consultation with one of our highly experienced solicitors today or contact us at info@legalkitz.com.au or by calling 1300 988 954.

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